Pleading Standards in Mass Tort Cases After Iqbal - Dinsmore ...

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quences of master complaints in complex litigation). Turner v. Murphy Oil USA, Inc., 2005 U.S. Dist. LEXIS 45123 (E.D. La. 2005). Courts have, in the past, addressed motions to dismiss master complaints. For example, in In re Bridgestone/ Firestone Inc. v. Wilderness Tires Prods. Liab. Litig., 155 F. Supp. 2d 1069 (S.D. Ind. 2001), the master complaint combined “dozens of class action complaints involving Firestone tires that were filed in or removed to federal district courts throughout the country and transferred to this MDL proceeding.” 155 F. Supp. 2d at 1076–77. In denying a motion directed to the pleading deficiencies of the master complaint, Judge Parker relied on the liberal standard of rule 8(a) to hold that plaintiffs were not required even to make a factual allegation that would place their claims within the relevant statute. Id. at 1107. See also, Turner, 2005 U.S. Dist. LEXIS 45123 at *6–7 (applying Conley and holding that where appropriate, dismissal of a portion of the master complaint will apply equally to individual complaints). Even in the pre-Iqbal era, defendants did have some successes. For example, in Wajda v. R.J. Reynolds Tobacco Co., 103 F. Supp. 2d 29 (D. Mass. 2000), the court addressed the merits of the plaintiff’s pleading in a smoking and health case: It is essentially a form complaint, one of many similar complaints filed in this Court by counsel who represent this plaintiff as well as others asserting claims related to tobacco use. This complaint, like the others, mounts a general attack on the tobacco industry, but, unlike a well-pleaded complaint, it reveals very little about the plaintiff’s individual case. The inadequacy of the pleading is addressed theory by theory below. 103 F. Supp. 2d at 32. The district court then analyzed each theory of liability in light of the limited allegations and found each lacking. Id. at 32–38. As such, it dismissed the complaint but granted the plaintiff additional time to file an amended complaint. Id. at 38. Nonetheless, in effect Conley has precluded most trial courts from assessing the underlying merits of a case at the outset, pushing that responsibility to the summary judgment stage. Because in most cases summary judgment typically follows discovery, meritless cases have enjoyed access to the court system and, therefore, acquired “value” to claimants and their counsel. Particularly in mass torts or class actions, defendants have faced a “Morton’s Fork”: either pay to settle a meritless case or pay potentially massive discovery costs only to face the vagaries of trial. This system engendered by the liberal “notice pleading” standard of Conley remained the rule for 50 years. Twombly and Iqbal— Revisiting Conley In 2007, the Court decided Bell Atlantic v. Twombly, 550 U.S. 544 (2007), a 7–2 decision that abrogated Conley’s “no set of facts” standard. In Twombly, a number of consumers brought a class action against the “incumbent local exchange carriers” (ILECs) of telephone and Internet services. Id. at 549–50. The complaint asserted that the ILECs had conspired to restrain trade by engaging in “parallel conduct” in their respective service areas designed to inhibit the growth of upstart “competitive local exchange carriers” (CLECs). Id. at 550. The ILECs allegedly made unfair agreements with the CLECs for access to the ILEC networks, provided inferior connections to the networks, overcharged the CLECs, and billed in ways designed to sabotage the CLEC’s relations with their customers. Id. The Court held that the plaintiffs’ complaint had failed to state a claim because it had not alleged facts sufficient to find that the ILECs had engaged in a conspiracy. The Court noted that the “parallel conduct” alleged by the plaintiffs did not indicate unlawful activity, as common perceptions of the market just as likely could explain the ILECs similar business actions. Id. at 555. As the Court wrote, proof of nothing more than “parallel conduct” was insufficient to prove antitrust conspiracy, as such evidence did not exclude the possibility of independent action. Id. The Court continued that, although a complaint did not “need detailed factual allegations,” a “formulaic recitation of the elements of a cause of action” was not enough. Id. It then rejected a literal reading of Conley’s “no set of facts” standard, stating that such a rule would permit wholly conclusory statements of a claim to withstand a motion to dismiss. Id. at 561. According to the Court, judicial application of such a literal reading would allow a claim to survive on nothing more than a a mere possibility that a plaintiff would later develop some undisclosed set of facts in support of the claim. Id. As the Court wrote, “[Con ley’s] “no set of facts” language can be read in isolation as saying that any statement revealing the theory of the “No set of facts”… would permit wholly conclusory statements of a claim to withstand a motion to dismiss. claim will suffice unless its factual impossibility may be shown from the face of the pleadings;….” Id. Noting that this “famous observation” had caused confusion for 50 years, the Court stated that the “no set of facts” language “[had] earned its retirement” and was a “phrase [that] is best forgotten as an incomplete, negative gloss on an accepted pleading standard….” Id. at 563. In place of the “no set of facts” rule, the Court set forth a plausibility standard that required plaintiffs to provide facts in their complaints sufficient to support a judicial finding that the claim asserted was not merely possible but plausible. Id. at 569. The Court emphasized, however, that it was not instituting a heightened pleading of specific facts but only requiring sufficient facts to show that a claim was plausible, rather than merely possible, on its face. Id. at 570. Twombly appeared to abrogate Conley and set a foundation for a new pleading standard, regardless of the Court’s proclamation reservation that the decision did not mandate a heightened pleading standard. But soon after the decision, its scope became unclear. Some courts and commentators began to wonder whether the Court intended to limit Twombly’s abrogation of Conley to the antitrust context for two reasons. See discussion, Robert G. Bone, For The Defense n December 2009 n 67
Product Liability Twombly, Pleading Rules, and the Regulation of Court Access, 94 Iowa L.R. 873, 881 (Mar. 2009). First, a significant portion of Twombly addressed the specific requirements of proving an antitrust “parallel conduct” claim, as well as the attendant costs and burdens of antitrust discovery generally. Twombly, 550 U.S. at 556–58. Second, within a month of the ruling, the Court The facts alleged must lead to the reasonable inference of a defendant’s culpability. issued two additional opinions on initial pleading sufficiency that raised questions about Twombly’s scope. Most notably, in Erickson v. Pardus, 551 U.S. 89, 127 S. Ct. 2197 (2007), the Court appeared to contradict Twombly’s interpretation of Rule 8(a)(2) pleading requirements. In Erickson, a pro se inmate had filed a §1983 action for unconstitutional denial of medical treatment against certain officials of the Colorado correctional facility in which he was incarcerated. Id. at 2198. As the Court summarized his complaint, he alleged that “a liver condition resulting from hepatitis C required a treatment program that [the] officials had commenced but then wrongfully terminated, with lifethreatening consequences.” Id. at 2197–98. The district court dismissed his case, and the Tenth Circuit affirmed, noting that the inmate’s allegations were “conclusory.” Id. at 2198. The Supreme Court wrote that, as the Tenth Circuit’s holding departed “in so stark a manner from the pleading standard mandated by the Federal Rules of Civil Procedure,” it would grant review. Id. The Court then reversed the Tenth Circuit, noting that Rule 8(a)(2) required only a “short and plain statement of the claim.” Id. at 2200. The Court then quoted Twombly’s Conley quote, seemingly out of context, that “[s]pe cific facts are not necessary,” and the “statement need only ‘give the defendant fair notice of what the… claim is and the grounds upon which it rests.’” Id. 68 n For The Defense n December 2009 Thus, in Erickson the Court made no mention of the “plausibility” standard it had seemed to articulate in Twombly, instead citing its previous decision for propositions it had appeared to abrogate. Taken together, the Twombly and Erickson decisions therefore created a significant question as to whether the Court had intended the former opinion to apply only in the antitrust context. See John H. Bogart, Living With Twombly, 22 Utah B.J. 23 (Mar./Apr. 2009) (discussing confusion created by the two decisions). A couple of weeks after deciding Erickson, the Court issued a third pleadings opinion, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S. Ct. 2499 (2007). In this opinion, the Court addressed the standard for motions to dismiss in the context of a securities fraud class action. In determining whether the complaint had pleaded facts sufficient to give rise to a “‘strong’ inference of scienter,” which was required by the Private Securities Litigation Reform Act (PSLRA), the Court held that a comparative inquiry was necessary to properly take into account plausible, opposing inferences from the facts alleged. Id. at 2509. A trial court weighing a motion to dismiss, therefore, “must consider plausible nonculpable explanations for the defendant’s conduct, as well as inferences favoring the plaintiff.” Id. at 2510. Although the Court set forth a standard in Tellabs similar to that espoused in Twombly, it did not reference Twombly. Instead, in Tellabs the Court heavily referred to congressional intent, noting that the PSLRA expressly required plaintiffs to “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. at 2508 (citing 15 U.S.C. §78u-4(b)(2)). The Tellabs majority’s reliance on the PSLA statutory language likely explains why the decision has received little attention in the debate about whether Twombly altered the Rule 8(a)(2) pleading standard. Even though Tellabs may not have provided support for a new interpretation of Rule 8, the decision is nonetheless instructive, due to the difference between the majority opinion and Justice Scalia’s separate opinion on the strength of the inference of scienter that a complaint must have. In holding that the plaintiffs’ complaint had failed to state a claim under the PSLRA, the Tellabs majority stated that “[a] complaint will survive… only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Id. at 2510 (emphasis added). On the other hand, in a separate opinion concurring in the judgment, Justice Scalia criticized the majority’s standard. Justice Scalia wrote that the phrase “strong inference” in the statute suggested a higher test than the majority’s “at least as compelling” inference standard. Id. at 2513. Giving the phrase its normal meaning, Justice Scalia argued that “the test should be whether the inference of scienter (if any) is more plausible than the inference of innocence.” Id. (emphasis in original). As Justice Scalia continued, a mere possibility is not a strong inference, because an “inference” connotes a “belief” in that which is inferred. Id. Thus, the pleading should lead to an inference of scienter more plausible than the converse. Although Erickson and Tellabs may have created confusion about whether the plausibility standard for assessing pleading sufficiency applied outside the antitrust and securities fields, in Iqbal the Court clarified that pursuant to Federal Rule of Civil Procedure 8, the “plausibility” standard is applicable in “all civil actions” proceeding in the federal district courts. Iqbal, 129 S. Ct. at 1953. The Court’s Iqbal decision notably solidifies the requirement that a court consider alternative explanations for a plaintiff’s allegations rather than presume that a plaintiff’s allegations are true. A plaintiff must do more than simply state unsubstantiated, “non- conclusory” facts to support a claim: the facts alleged must lead to the reasonable inference of a defendant’s culpability. If a plaintiff only offers an unsubstantiated, “non- conclusory” explanation to support allegations in a complaint, that plaintiff has failed to meet its pleading burden, and a court may properly dismiss the complaint. Similar to the Erickson case, Iqbal concerned a §1983 action, though with a higher profile, for violation of constitutional rights arising from imprisonment. In Iqbal, the respondent, Javaid Iqbal, was a Muslim Pakistani who was arrested on criminal charges following the September 11, 2001 attacks. Id. at 1942. Following the 2001
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